Highlights Include:
- For the third quarter of 2011, earnings per share were
$0.15, up from $0.03 in the second quarter of 2011 and up from
$0.12 in the third quarter of 2010, as net income and net income
available to common shareholders also increased
- Earnings per share equaled $0.28 for the first nine
months of 2011, up from $0.22 per share in the first nine months of
2010
- Net income of $3,473,000 in the first nine months of
2011 increased $553,000 compared to $2,920,000 in the first nine
months of 2010, and net income available to common shareholders
increased to $2,213,000 from $1,660,000
- Provision expense of $3.5 million in the third quarter
of 2011 exceeded net charge-offs of $3.4 million and decreased
$797,000 from the second quarter of 2011, but was $393,000 higher
than a year ago
- Ratio of the allowance for loan losses to loans
strengthened to 2.16% at September 30, 2011,
compared to 1.97% a year ago
- Gain on sale of mortgages and reduced FDIC insurance
expense contributed to the improved third quarter
results
- Equity ratios remained strong and all affiliate banks
continue to exceed all regulatory well-capitalized
requirements
Thomas R. Sullivan, President and Chief Executive Officer of
Firstbank Corporation (Nasdaq:FBMI), announced net income of
$1,630,000 for the third quarter of 2011, compared to $1,324,000
for the third quarter of 2010, with net income available to common
shareholders of $1,210,000 in the third quarter of 2011 compared to
$904,000 in the third quarter of 2010. Earnings per share were
$0.15 in the third quarter of 2011 compared to $0.12 in the third
quarter of 2010. Returns on average assets and average equity for
the third quarter of 2011 were 0.41% and 4.1%, respectively,
compared to 0.34% and 3.4% respectively in the third quarter of
2010.
For the first nine months of 2011, net income of $3,473,000
increased 18.9% from the $2,920,000 earned in the first nine months
of 2010. Net income available to common shareholders of $2,213,000
in the first nine months of 2011 increased 33.3% compared to the
$1,660,000 in the first nine months of 2010. Earnings per share
were $0.28 in the first nine months of 2011 compared to $0.22 in
the first nine months of 2010. Returns on average assets and
average equity for the first nine months of 2011 were 0.32% and
3.2%, respectively, compared to 0.27% and 2.8% respectively in the
first nine months of 2010.
The provision for loan losses, at $3,459,000 in the third
quarter of 2011, was 19% less than the amount required in the
second quarter of 2011, but was 13% more than the amount in the
year-ago third quarter. The level of provision expense and other
expenses related to management and collection of the loan portfolio
continue to be the major restraints to higher levels of
profitability. The provision expense of $3,459,000 in the third
quarter of 2011 exceeded net charge-offs in the quarter of
$3,402,000. The allowance as a percentage of loans increased due to
the continued shrinkage of the loan portfolio.
Net interest income, at $13,781,000 in the third quarter of
2011, increased 0.3% compared to the second quarter of 2011 and
increased 5.2% over the third quarter of 2010. Although net
interest income grew slightly in conjunction with modest growth in
earning assets, continued reduction in funding costs was more than
offset by shrinkage in the loan portfolio caused by lagging loan
demand, resulting in a decline in the net interest margin.
Firstbank's net interest margin was 4.03% in the third quarter
of 2011 compared to 4.08% in the second quarter of 2011 and 3.89%
in the third quarter of 2010. FHLB advances and notes payable
declined by $5 million in the third quarter of 2011 and were $56
million lower than the year-ago balance. Core deposits increased
1.8% in the third quarter of 2011 and were 5.3% above the year-ago
level, providing a lower cost source of funding. Also, strategies
employed during 2010 and throughout 2011 aimed at incorporating
floors on variable rate loans and re-pricing deposits upon renewal
at currently competitive rates, have resulted in improvement in net
interest margin compared to the prior year.
Total non-interest income, at $2,593,000 in the third quarter of
2011, increased 29% from the second quarter of 2011, but was 21%
lower than in the third quarter of 2010. Gain on sale of mortgages,
at $1,040,000 in the third quarter of 2011, increased 152% compared
to the second quarter of 2011 but was 49% below the year-ago level.
Mortgage refinance activity surged in the third quarter of 2011,
but not to the extremely high levels of year-ago. Volume compared
to year-ago is tempered by more stringent and costly secondary
market requirements. The category of "other" non-interest income,
at $404,000 in the third quarter of 2011, was 19% more than the
amount in the second quarter of 2011 and 110% more than in the
third quarter of 2010. This category of other non-interest income
was helped in the third quarter of 2011 by $98,000 gain on sale of
other real estate while the amount of gain in the second quarter of
2011 was less than $1,000 and losses of $196,000 reduced this
category of income in the year-ago third quarter.
Total non-interest expense, at $10,745,000 in the third quarter
of 2011, was 0.6% lower than the level in the second quarter of
2011 and was 1.8% lower than the level in the third quarter of
2010, as expense control efforts continued. Salaries and employee
benefits increased 5.7% compared to the year-ago quarter, and
occupancy and equipment costs declined by 1.1%. FDIC insurance
premium expense at $162,000 in the third quarter of 2011 was 68%
below the amount in the second quarter of 2011 and 69% below the
level in the third quarter of 2010. Firstbank Corporation's FDIC
expense in the third quarter of 2011 included an adjustment for a
$167,000 overstatement of expense in the second quarter of 2011.
The adjustment added approximately $0.014 to earnings per share in
the third quarter of 2011. A normalized level of quarterly expense
based on the new methodology for assessing premiums is
approximately $330,000. The reduction in FDIC expense reflects the
benefit to Firstbank's banks, and community banks throughout the
nation, of the change by the FDIC to assessing premiums based on
total assets rather than just total deposits. The FDIC made this
change to better align premiums with risk to the insurance fund.
The category of "other" non-interest expense, totaling $3,589,000
in the third quarter of 2011, decreased 2.3% compared to the second
quarter of 2011 and 2.4% compared to the third quarter of 2010. The
most significant factors in both comparisons were variations in
write-downs of valuations of other real estate owned and expenses
related to mortgage volume. Write-downs of other real estate owned
were $499,000 in the third quarter of 2011 compared to $642,000 in
the second quarter of 2011 and $463,000 in the third quarter of
2010.
Mr. Sullivan stated, "We again have experienced a quarter, in
the third quarter of 2011, where loan charge-offs and charge-downs
and the corresponding need for provision expense continue well
above historical norms. These and other expenses related to
managing the loan portfolio offset positive developments within our
earnings profile. Our net interest margin, although declining by a
small amount from the second quarter, is well above year-ago levels
and our operating costs are continuing to be managed tightly.
Higher than normal costs of managing credits and other real estate
owned will stay with us for some time, but eventually should
reduce.
"As we have stated previously, our capital, funding, and human
resources remain ample to support increased lending, although our
loan portfolios continue to shrink. We maintain good relationships
and communications with customers who will eventually want to
expand their businesses and activities and provide an increased
demand for loans. We have oriented our marketing messages to
communicate that we have money to lend and are willing to do so. We
believe our banks are well positioned to participate in and help
support a better Michigan economy as one of the major community
banking organizations in the state.
"During the third quarter we commissioned an annual update of
the third-party-expert valuation of goodwill on our balance sheet,
to test for impairment. That valuation, which assures the proper
application of accounting rules and principles, indicates that the
amount of goodwill on our books is not considered impaired and
requires no charge to earnings. As a result, we show a book value
per share of $15.36 at September 30, 2011, which continues to be
substantially above tangible book value per share of $10.64.
"Also, at the end of the third quarter, the previously announced
merger of our smallest bank, Firstbank – St. Johns, with the larger
Firstbank – Alma was completed without fanfare or interruption of
customer service. Systems consolidations will take place in the
fourth quarter, and we will begin realizing regulatory and other
efficiencies as a result of the combination, without negative
impact on our service to our markets."
Total assets of Firstbank Corporation at September 30, 2011,
were $1.497 billion, an increase of 1.3% from the year-ago period.
Total portfolio loans of $989 million were 6.0% below the year-ago
level. Commercial and commercial real estate loans decreased 6.5%
over this twelve month period, and real estate construction loans
decreased 2.2%. Residential mortgage loans decreased 6.2% and
consumer loans decreased 4.7%. While Firstbank has ample capital
and funding resources to increase loans on its balance sheet,
demand for funds for new ventures by quality borrowers remains weak
due to uncertainty regarding the economy. Also, the strong mortgage
refinance activity in 2010 resulted in mortgage loans being
financed in the secondary market rather than on the balance sheet
of the company. Total deposits as of September 30, 2011, were
$1.240 billion, compared to $1.172 billion at September 30, 2010,
an increase of 5.8%. Core deposits increased $62 million or 5.3%
over the year-ago level.
Net charge-offs were $3,402,000 in the third quarter of 2011,
compared to $4,277,000 in the second quarter of 2011 and $2,928,000
in the third quarter of 2010. In the third quarter of 2011, net
charge-offs annualized represented 1.37% of average loans, compared
to 1.69% in the second quarter of 2011 and 1.10% in the third
quarter of 2010.
Provision expense was increased in the third quarter so that the
ratio of the allowance for loan losses to loans increased to 2.16%,
compared to 2.12% at June 30, 2011, and 1.97% at September 30,
2010. More stringent definitional requirements are being applied by
regulators in determining what loans are to be reported on call
reports as "troubled debt restructurings" (TDRs). These loans
result from mutual efforts between the bank and the borrower to
adjust cash flow requirements and other terms of loans to reflect
new economic reality and to protect the financial interest of the
bank. Restructuring allows the customer to continue to meet
financial obligations while dealing with the protracted slow
economy and particularly weak real estate sales. Loans in this
category continue to perform according to the agreed upon terms. If
they do not continue to perform, they are moved to either the
past-due-more-than-90-days category or to the non-accrual category
as circumstances indicate. Mostly as a result of the more stringent
definitional requirements, our performing adjusted loans (TDRs)
increased to $18,260,000 at September 30, 2011, compared to
$17,989,000 at June 30, 2011, and compared to $1,785,000 at
September 30, 2010. Conversely, loans past due over 90 days and
non-accrual loans declined from the year-ago level. Loans past due
over 90 days were $1,455,000 at September 30, 2011, decreased from
the $1,787,000 at June 30, 2011, and $3,554,000 lower, or 71%
lower, than the $5,009,000 at September 30, 2010. Non-accrual loans
were $20,873,000 at September 30, 2011, an increase of 3.3% from
the level at June 30, 2011, but a decrease of 26.8% from the level
at September 30, 2010.
Total shareholders' equity at September 30, 2011, was 2.7%
higher than at September 30, 2010. The ratio of average equity to
average assets was 10.0% in the third quarter of 2011, compared to
9.8% in the third quarter of 2010. All of Firstbank Corporation's
affiliate banks continue to meet regulatory well-capitalized
requirements.
Firstbank Corporation, headquartered in Alma, Michigan, is a
bank holding company using a multi-bank-charter format with assets
of $1.5 billion and 52 banking offices serving Michigan's Lower
Peninsula. Bank subsidiaries include: Firstbank – Alma; Firstbank
(Mt. Pleasant); Firstbank – West Branch; Keystone Community Bank;
and Firstbank – West Michigan.
This press release contains certain forward-looking statements
that involve risks and uncertainties. When used in this press
release the words "anticipate," "believe," "expect," "hopeful,"
"potential," "should," and similar expressions identify
forward-looking statements. Forward-looking statements include, but
are not limited to, statements concerning future business growth,
changes in interest rates, loan charge-off rates, demand for new
loans, the performance of loans with provisions, and the resolution
of problem loans. Such statements are subject to certain risks and
uncertainties which could cause actual results to differ materially
from those expressed or implied by such forward-looking statements,
including, but not limited to, economic, competitive, governmental
and technological factors affecting the Company's operations,
markets, products, services, interest rates and fees for services.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
press release.
FIRSTBANK CORPORATION |
CONSOLIDATED STATEMENTS OF
INCOME |
(Dollars in thousands except
per share data) |
UNAUDITED |
|
|
|
|
|
|
|
Three Months
Ended: |
Nine Months
Ended: |
|
Sep 30 |
Jun 30 |
Sep 30 |
Sep 30 |
Sep 30 |
|
2011 |
2011 |
2010 |
2011 |
2010 |
Interest income: |
|
|
|
|
|
Interest and fees on
loans |
$15,290 |
$15,571 |
$16,869 |
$46,507 |
$50,883 |
Investment
securities |
|
|
|
|
|
Taxable |
1,309 |
1,319 |
1,032 |
3,639 |
2,658 |
Exempt from federal
income tax |
271 |
280 |
268 |
844 |
849 |
Short term
investments |
54 |
45 |
52 |
138 |
155 |
Total interest income |
16,924 |
17,215 |
18,221 |
51,128 |
54,545 |
|
|
|
|
|
|
Interest expense: |
|
|
|
|
|
Deposits |
2,691 |
2,945 |
3,871 |
8,685 |
12,347 |
Notes payable and other
borrowing |
452 |
529 |
1,254 |
1,629 |
4,110 |
Total interest expense |
3,143 |
3,474 |
5,125 |
10,314 |
16,457 |
|
|
|
|
|
|
Net interest income |
13,781 |
13,741 |
13,096 |
40,814 |
38,088 |
Provision for loan losses |
3,459 |
4,256 |
3,066 |
10,726 |
8,623 |
Net interest income after provision for loan
losses |
10,322 |
9,485 |
10,030 |
30,088 |
29,465 |
|
|
|
|
|
|
Noninterest income: |
|
|
|
|
|
Gain on sale of mortgage
loans |
1,040 |
413 |
2,054 |
2,021 |
3,150 |
Service charges on
deposit accounts |
1,123 |
1,182 |
1,144 |
3,397 |
3,421 |
Gain (loss) on trading
account securities |
0 |
2 |
(10) |
8 |
13 |
Gain (loss) on sale of
AFS securities |
9 |
(2) |
1 |
(1) |
10 |
Mortgage servicing |
17 |
76 |
(98) |
121 |
91 |
Other |
404 |
340 |
192 |
1,103 |
1,227 |
Total noninterest income |
2,593 |
2,011 |
3,283 |
6,649 |
7,912 |
|
|
|
|
|
|
Noninterest expense: |
|
|
|
|
|
Salaries and employee
benefits |
5,480 |
5,170 |
5,186 |
15,920 |
15,895 |
Occupancy and
equipment |
1,346 |
1,284 |
1,361 |
4,054 |
4,220 |
Amortization of
intangibles |
168 |
185 |
191 |
538 |
611 |
FDIC insurance
premium |
162 |
499 |
525 |
1,204 |
1,555 |
Other |
3,589 |
3,672 |
3,678 |
10,601 |
10,806 |
Total noninterest expense |
10,745 |
10,810 |
10,941 |
32,317 |
33,087 |
|
|
|
|
|
|
Income before federal income taxes |
2,170 |
686 |
2,372 |
4,420 |
4,290 |
Federal income taxes |
540 |
58 |
1,048 |
947 |
1,370 |
Net Income |
1,630 |
628 |
1,324 |
3,473 |
2,920 |
Preferred Stock Dividends |
420 |
420 |
420 |
1,260 |
1,260 |
Net Income available to Common
Shareholders |
$1,210 |
$208 |
$904 |
$2,213 |
$1,660 |
|
|
|
|
|
|
Fully Tax Equivalent Net Interest Income |
$13,949 |
$13,915 |
$13,274 |
$41,328 |
$38,677 |
|
|
|
|
|
|
Per Share Data: |
|
|
|
|
|
Basic Earnings |
$0.15 |
$0.03 |
$0.12 |
$0.28 |
$0.22 |
Diluted Earnings |
$0.15 |
$0.03 |
$0.12 |
$0.28 |
$0.22 |
Dividends Paid |
$0.01 |
$0.01 |
$0.01 |
$0.03 |
$0.07 |
|
|
|
|
|
|
Performance Ratios: |
|
|
|
|
|
Return on Average Assets
(a) |
0.41% |
0.18% |
0.34% |
0.32% |
0.27% |
Return on Average Equity
(a) |
4.1% |
1.8% |
3.4% |
3.2% |
2.8% |
Net Interest Margin (FTE)
(a) |
4.03% |
4.08% |
3.89% |
4.06% |
3.83% |
Book Value Per Share
(b) |
$15.36 |
$15.14 |
$15.01 |
$15.36 |
$15.01 |
Average Equity/Average
Assets |
10.0% |
10.0% |
9.8% |
10.1% |
9.9% |
Net Charge-offs |
$3,402 |
$4,277 |
$2,928 |
$10,774 |
$7,011 |
Net Charge-offs as a % of
Average Loans (c)(a) |
1.37% |
1.69% |
1.10% |
1.42% |
0.88% |
|
|
|
|
|
|
(a) Annualized |
|
|
|
|
|
(b) Period End |
|
|
|
` |
|
(c) Total loans less loans held for
sale |
|
|
|
|
|
|
|
FIRSTBANK CORPORATION |
CONSOLIDATED BALANCE
SHEETS |
(Dollars in thousands) |
UNAUDITED |
|
|
|
|
|
|
Sep 30 |
Jun 30 |
Dec 31 |
Sep 30 |
|
2011 |
2011 |
2010 |
2010 |
ASSETS |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents: |
|
|
|
|
Cash and due from
banks |
$24,086 |
$28,124 |
$25,322 |
$25,791 |
Short term
investments |
77,477 |
68,594 |
48,216 |
68,657 |
Total cash and cash equivalents |
101,563 |
96,718 |
73,538 |
94,448 |
|
|
|
|
|
Securities available for sale |
323,245 |
296,003 |
266,121 |
242,971 |
Federal Home Loan Bank stock |
7,266 |
7,266 |
8,203 |
9,084 |
Loans: |
|
|
|
|
Loans held for sale |
2,207 |
434 |
1,355 |
1,932 |
Portfolio loans: |
|
|
|
|
Commercial |
157,155 |
162,685 |
164,413 |
169,652 |
Commercial real
estate |
352,156 |
365,803 |
373,996 |
374,866 |
Residential mortgage |
344,700 |
344,853 |
352,652 |
367,617 |
Real estate
construction |
74,561 |
73,019 |
81,016 |
76,255 |
Consumer |
60,481 |
59,601 |
59,543 |
63,455 |
Total portfolio loans |
989,053 |
1,005,961 |
1,031,620 |
1,051,845 |
Less allowance for loan
losses |
(21,383) |
(21,327) |
(21,431) |
(20,725) |
Net portfolio loans |
967,670 |
984,634 |
1,010,189 |
1,031,120 |
|
|
|
|
|
Premises and equipment, net |
25,454 |
25,557 |
25,431 |
24,846 |
Goodwill |
35,513 |
35,513 |
35,513 |
35,513 |
Other intangibles |
1,607 |
1,775 |
2,145 |
2,329 |
Other assets |
32,421 |
33,493 |
35,848 |
35,597 |
TOTAL ASSETS |
$1,496,946 |
$1,481,393 |
$1,458,343 |
$1,477,840 |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
Deposits: |
|
|
|
|
Noninterest bearing
accounts |
$204,604 |
$194,795 |
$185,191 |
$172,416 |
Interest bearing
accounts: |
|
|
|
|
Demand |
331,007 |
310,250 |
293,900 |
284,520 |
Savings |
243,724 |
237,008 |
210,239 |
202,816 |
Time |
443,417 |
459,489 |
486,506 |
501,059 |
Wholesale CD's |
17,417 |
16,778 |
7,947 |
11,440 |
Total deposits |
1,240,169 |
1,218,320 |
1,183,783 |
1,172,251 |
|
|
|
|
|
Securities sold under agreements to |
|
|
|
|
repurchase and overnight
borrowings |
42,839 |
46,304 |
41,328 |
39,617 |
FHLB Advances and notes payable |
16,517 |
21,543 |
40,658 |
72,100 |
Subordinated Debt |
36,084 |
36,084 |
36,084 |
36,084 |
Accrued interest and other liabilities |
7,754 |
7,480 |
8,062 |
8,173 |
Total liabilities |
1,343,363 |
1,329,731 |
1,309,915 |
1,328,225 |
|
|
|
|
|
SHAREHOLDERS' EQUITY |
|
|
|
|
Preferred stock; no par value, 300,000 |
|
|
|
|
shares authorized, 33,000
outstanding |
32,785 |
32,778 |
32,763 |
32,756 |
Common stock; 20,000,000 shares
authorized |
115,663 |
115,571 |
115,224 |
115,132 |
Retained earnings |
2,296 |
1,157 |
295 |
(57) |
Accumulated other comprehensive
income/(loss) |
2,839 |
2,156 |
146 |
1,784 |
Total shareholders' equity |
153,583 |
151,662 |
148,428 |
149,615 |
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY |
$1,496,946 |
$1,481,393 |
$1,458,343 |
$1,477,840 |
|
|
|
|
|
Common stock shares issued and
outstanding |
7,865,166 |
7,853,295 |
7,803,816 |
7,786,405 |
Principal Balance of Loans Serviced for
Others ($mil) |
$601.6 |
$604.4 |
$616.9 |
$605.2 |
|
|
|
|
|
Asset Quality Information: |
|
|
|
|
Performing Adjusted Loans
(TDRs) (b) |
18,260 |
17,989 |
10,056 |
1,785 |
Loans Past Due over 90
Days |
1,455 |
1,787 |
606 |
5,009 |
Non-Accrual Loans |
20,873 |
20,205 |
26,362 |
28,511 |
Other Real Estate
Owned |
7,367 |
8,469 |
8,315 |
9,020 |
Allowance for Loan Loss
as a % of Loans (a) |
2.16% |
2.12% |
2.08% |
1.97% |
|
|
|
|
|
Quarterly Average Balances: |
|
|
|
|
Total Portfolio Loans
(a) |
$996,234 |
$1,009,646 |
$1,041,986 |
$1,065,850 |
Total Earning Assets |
1,376,072 |
1,367,013 |
1,355,226 |
1,358,914 |
Total Shareholders'
Equity |
150,092 |
149,599 |
148,043 |
147,273 |
Total Assets |
1,499,707 |
1,490,020 |
1,484,854 |
1,497,943 |
Diluted Shares
Outstanding |
7,859,159 |
7,835,123 |
7,796,168 |
7,776,438 |
|
|
|
|
|
(a) Total Loans less loans held for sale |
|
|
|
|
(b) Troubled Debt Restructurings in Call
Reports |
|
|
|
|
CONTACT: Samuel G. Stone
Executive Vice President and Chief Financial Officer
(989) 466-7325
Firstbank Corp. (MM) (NASDAQ:FBMI)
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